Daily-Deal Sites Offer Dose of Growth for Magazine Circulation

Responses to Subscription Offers on Groupon, LivingSocial and Fab.com Have Been Positive, but Will Strong Renewal Rates Follow?

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Daily-deal sites like Groupon have proved a challenge for restaurants that can't handle the influx of hundreds of customers redeeming deals all at once. Publishing companies, however, are built to scale their audience as needed.
Daily-deal sites like Groupon have proved a challenge for restaurants that can't handle the influx of hundreds of customers redeeming deals all at once. Publishing companies, however, are built to scale their audience as needed.
For the past two years, there's been a healthy amount of debate -- and maybe a bit of praying -- about whether the iPad could rescue the publishing industry.

But as newsstand sales continue to plunge, publishers say that daily-deal sites, such as Groupon, LivingSocial or Fab.com, are almost as helpful as tablets in their search for new subscribers. The sites, they add, are a growing part of their digital-marketing strategies to boost print-subscription rates.

Among the publications that have recently sold subscriptions via daily-deal sites are The New York Times, The Washington Post, Los Angeles Times, Philadelphia Inquirer, Wall Street Journal, Wired, The Economist, Esquire, US Weekly, Readers Digest, Cosmopolitan, Lucky, Allure, Men's Health, Washingtonian, Bazaar, and New York magazine.

Publishers like what they see in terms of the demographic responding to deals. They also like the simplicity. Online flash-sales are a fairly easy and quick way to sign up hundreds of subscribers for between 12 and 24 months. But publishers are wary of getting too excited; they said the deciding factor for whether daily deals are a long-term part of their digital-marketing strategy will be if customers are willing to re-up at a higher price once the deal-priced subscriptions run out.

"We're dabbling with [deals sites] to see if they are a scalable and sustainable business," said Liberta Abbondante, senior VP-consumer marketing at Hearst.

It's been about a year since Hearst tried LivingSocial and Groupon, starting with a deal for O, the Oprah Magazine. That dabbling turned into just under 10% of subscriptions sold through online sources.

Hearst has continued to run deals intermittently. Most recently it marketed a holiday special for all its titles via both daily-deal sites with a one-year subscription to Elle, Marie Claire or Cosmo for $5. While earlier offers had been on par with the prices offered via a Publishers Clearinghouse or other type of magazine-subscription service, Ms. Abbondante said that the holiday deal was a much lower price point and thus a much better value.

Hearst likes who it's reaching with the sites. "They are younger, they tend to be between 18 and 34 years old and happen to have a very high income of 100,000 or plus , so it's the right demographic for the titles," said Ms. Abbondante.

"It looks like it can grow to be a scalable source," she said, "but our happiness will be measured in terms of retention. How will this audience respond when we go to convert them toward the end of this year?"

Lauren Starke, director-public relations for New York magazine, described its most recent Living Social promotion, which ran in January, as "very successful, with over 5,000 subscriptions generated."

"We'll continue to authorize offers like these quarterly, given the significant volume of new customers they can bring to the magazine at favorable economics," Ms. Starke said. "We definitely think they're a useful part of our marketing strategy. We do monitor the renewal rates closely, and thus far they have been in line with subscriptions from other sources. We only offer a limited number of deals and for a limited time."

Wired magazine has been experimenting with DailyCandy and Fab.com. The latter is proving a big supporter of print media; for two weeks in December it created a pop-up shop called "Our Favorite Magazines" to sell discounted subscriptions. Fab.com sold 20,000 print subs in December -- the top five sellers were Elle Decor, Draft, How, Bark and Lucky.

"We have seen that there is still an appetite for print," said Melissa Klein, Fab.com's VP-communications. "The products that we have on our site have a story behind them. ... Subscriptions to magazines do well on our platform because our audience has shown that that 's what they appreciate." She noted that Fab.com, which has about 2 million members, is not in the college crowd, and its typical user is more likely in her early 40s. "We have such an eclectic group of members who are coming back to our site every day at 11 a.m. to see what the sales are. You'll continue to see [magazine] sales happening and success with those sales."

Mitch Spolan, LivingSocial's senior VP-national sales, thinks publications are doing well on the site because reading is an experience, and that 's what its customers are seeking. And because a magazine will arrive in your mailbox once a month for a year or two, it feels like a lasting experience, or as Mr. Spolan calls it, "an impulse buy that makes sense."

"We'll continually evaluate which titles worked exceedingly well, and which didn't, and we'll continue to evolve and learn," said Mr. Spolan. "It's mutually beneficial. I see no reason why we won't continue to work [with the magazine industry]."

Some anecdotal evidence suggests that daily deal sites' partnerships with publishers have been more successful than those with other vendors. For example, daily-deal sites have proved a challenge for restaurants that can't handle the influx of hundreds of customers redeeming deals all at once. Publishing companies, however, are built to scale their audience as needed.

LivingSocial, Groupon and Fab.com provided no details on the economics of these deals. But Fab.com's Ms. Klein noted that each deal is different. "The main publishers we've worked with are Condé Nast, Hearst, and Wenner," said Groupon spokeswoman Julie Mossler. "Additionally, we've had a successful partnership with an online third party, Blue Dolphin. We've sold from 30,000 to 150,000 memberships individually for these partners."

"Anything that works for getting people to buy a subscription these days is a good thing," said Thea Selby, who worked in publishing before launching her own circulation consultancy in San Francisco more than a decade ago. Her firm, Next Steps Marketing, advises small to midsize titles, such as the The New Republic, California Home & Design and MIT's Technology Review. She's worked with some of them to advertise discounted subscriptions on daily-deal sites. "We are struggling to figure out how to monetize content, and advertising is one way, but growing readers is another," Ms. Selby said.

She said publishers are rightly concerned to wonder whether magazine subscribers will be willing to re-up at a higher rate once the subscriptions bought off of daily-deal sites run out, but that there is a bigger wrinkle she hopes can be smoothed over to prevent a customer-service nightmare.

Ms. Selby points out that on some daily deal sites, there are two steps to redeeming a deal: making a purchase via the site, then opting in to redeem the product. She said that she worries that in today's attention-deficient society, consumers might forget the second part, or if they're not familiar with the process of buying a daily deal they might not realize they need to actually redeem the deal they bought to activate the magazine subscription.

Groupon's Ms. Mossler said her site is "looking to refine that process so that you purchase and enter mailing info on our site."

Though none of the publishers Ad Age contacted complained about redemption rates, Ms. Selby said that from her experience, the percentage varies. The lowest redemption rate she's observed is 70%, but a more usual redemption rate would hover between 80% to 85%.

"The dirty little secret is [most vendors or partners on daily-deal sites] hope for very low retention," Ms. Selby said. "Take a spa, for example. They hope that thousands of people will give them $75 and only two people will actually redeem it. They just want the money. But with a magazine marketer, you need a reader. The problem with magazine marketing is that we don't really care about the money from subscriptions. We care about the product. Our money comes from advertising, so we want the subscribers."

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